It is an exciting time when your teenager begins to work their very first job. There is a sense of independence, accomplishment, empowerment and agency that comes with this new responsibility. Taxes also become a consideration at this age. Though a 16-year-old might be tax-exempt if they do not earn more than the standard deduction, chances are good that their employer will still want them to fill out a W-4 form when they begin employment.
W-4 Form Explained
While your teenager is likely to encounter many different tax forms over time, the W-4 is likely to be one of the first. Their employer will want to make sure that they are withholding the correct amount of money from your teen's check for federal taxes.
If too much is withheld from your teenager's paychecks, they will receive it back at tax time in the form of a refund. This is one reason that a teenager might want to file their taxes, even if they do not earn more than the standard deduction and are not technically required to do so. On the other hand, if too little money is withheld, a young person could find themselves in the position of owing money at tax time, a stress that not many teenagers are prepared to deal with.
Basic W-4 for Teenager: 2021
When your teenager fills out their very first W-4 form, the IRS provides instructions to help them through the process. During step one, they will need to include basic information like their name, address and Social Security number. They will also be prompted to check a box indicating that they are single, and not married or head of the household.
Provided that your teen does not hold more than one job, have their own dependents or expect to claim deductions, they will skip down to step five on the W-4 form. This is where they simply sign and date the form, before handing it back to their employer.
Teens Earning Tips
Sometimes teens accept jobs where they earn additional income through tips. For instance, they might wait tables, work as a caddie or work as a bellhop. For many of these jobs, income that comes through tips far exceeds any hourly pay. Tips are generally reported to an employer on a monthly basis and can raise income enough to change withholding, so check with an accountant to find out how to ensure enough money is withheld from tips to account for however much your teen expects to owe in taxes.
Tips also change how your teen fills out a variety of different tax forms. For instance, according to the IRS, they will need to submit form 4137 with form 1040 at tax time. Form 4137 helps them document all of their tip income and calculate their taxable income accurately.
Teens With Multiple Jobs
The IRS provides some of the most reliable and best online tax information and advice on their website, especially as it pertains to a variety of circumstances outside of the norm. If your teen works multiple jobs, their Tax Withholding Estimator tool can help you determine the best way to fill out a W-4 form.
For instance, if your teen works five hours a week at the golf course and 15 hours a week at a local café, the IRS estimator will likely recommend that they check a box in step two of the W-4 form for both jobs. Or, if your teen works three jobs because they also babysit or mow lawns on the weekend, they might need to withhold additional money in step four.